EFFECT OF SUBPRIME CRISIS ON CO-MOVEMENT BEHAVIOR OF ISLAMIC AND CONVENTIONAL STOCK

Abstract

This paper attempts to explore the impact of the global financial crisis, generally named as Subprime crisis, on the degree of integration between conventional and Islamic stock markets. For his purpose, index data (both Islamic and Conventional indexes) from five countries (USA, UK, Canada, Japan and Indonesia) are used. The result from Engle Granger co-integration test pointed that, the financial crisis affected the integration between Islamic and conventional stock market only in Canada and Indonesia, whilst no clear effect could be found on the rest of the countries. On the other hand, the results of Granger Causality presented variations on the causality relationship in each country.